Did the lobbyists at the American Council on Education (ACE) sleep through the hearings that Sen. Tom Harkin of Iowa have held on the for-profit higher education industry over the past two years? Were they too busy snoozing to notice all of the scandals embroiling the sector that have exposed the wholesale failure of federal and state regulators and accreditors to safeguard the federal student aid programs and protect students?

Judging from a letter that the American Council on Education (ACE) sent to Capitol Hill late last month calling on Congress to rescind the U.S. Department of Education’s state authorization regulation, it certainly appears so.

In the letter, which ACE sent on behalf of itself and about 90 other higher education associations (including the major national and regional accrediting agencies), ACE’s president Molly Corbett Broad argues that the regulation the Obama administration enacted last year to strengthen state oversight over colleges participating in the federal student aid programs is unnecessary, “given the almost total lack of evidence of a problem.” She continues:

The state authorization regulation intrudes upon prerogatives properly reserved to the states, potentially upsetting recognition and complaint resolution procedures that have functioned effectively for decades.

Functioned effectively for decades? If only it were so!

In reality, most states have utterly neglected the oversight responsibilities that Congress assigned them when it made states, along with accreditation agencies and the U.S. Department of Education, part of the regulatory “triad” in charge of overseeing the colleges that participate in federal financial aid programs. In so doing, they have failed to protect the most vulnerable students in their states from unscrupulous for-profit colleges.

For instance, many states have simply turned over their authorization and oversight responsibilities to accreditation agencies, which have proven to be even less adept at distinguishing good proprietary schools from bad.

Take California, for example. The California bureau in charge of licensing and monitoring for-profit institutions in the state has little to no authority over accredited schools. According to Erica Perez of California Watch:

Schools with national accreditation, such as the for-profit Art Institute of California-Los Angeles for example, are automatically approved to operate by dint of their accreditation. Colleges that are regionally accredited are exempt from nearly all the state requirements. This includes Argosy University-San Francisco Bay Area in Alameda.

Because Argosy, for example, is accredited by the Western Association of Schools and Colleges, it does not have to follow any of the state’s disclosure requirements. Students at the school can’t lodge a complaint with the bureau if they’ve been misled. And the bureau can’t investigate the school or take action against any fraud or abuse…

That means hundreds of thousands of California students in private [for-profit] institutions are not protected by the bureau. More than 250,000 students statewide attend regionally accredited private institutions – which includes a mix of private for-profit and nonprofit colleges.

The fact that the bureau has the power to oversee unaccredited trade schools is actually an improvement over recent years when these institutions weren’t being monitored at all.

California is hardly alone. In a report it released in December entitled “State Inaction: Gaps in Oversight of For-Profit Higher Education,” the National Consumer Law Center found that state oversight over the sector has generally been “dismal.” The group reported that many of the state agencies in charge of monitoring these schools lack sufficient resources and staff to carry out their responsibilities. Others have been captured by the industry. For example, in Kentucky, six of the eleven members of the state regulatory agency’s board work at for-profit institutions, and they have gone so far as to “actively lobby to reduce oversight of the industry.” According to the report:

Last September, the Board sent a letter to Education Secretary Arne Duncan requesting that he withdraw a proposed rule designed to protect students from programs with poor outcomes. The letter was signed by Mark Gabis, then-chair of the Board. He is now being sued by Kentucky’s Attorney General for violating the state’s Consumer Protection Act as president of Daymar College.

Talk about the fox guarding the hen house!

The lobbyists at ACE could have justifiably argued that the Obama administration erred by taking a one-size all approach in extending the state authorization requirements to their institutions. After all, the problems that the administration aimed to address came overwhelmingly from the for-profit college sector.

But that’s not the argument that they’re making (perhaps because they know how it would have been received by the industry’s allies in Congress). Instead, they are denying that there have been any problems at all.

Policymakers, regulators, and lobbyists have for too long perpetuated the myth that the regulatory TRIAD is working – all the while turning a blind eye to the extraordinary abuses that were occurring right under their noses. By putting their imprimatur on this fiction, ACE and the other 90 higher education organizations that signed on to this letter threw students whose lives have been damaged by predatory schools under the bus.

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5 Comments

Don GrybasMarch 29, 2012 at 1:50 pm

In an effort to provide readers with accurate default information published by the U.S. Department of Education consider the following. Below are the most current official cohort default rates for public, private, and proprietary, less than 2-year institutions:
Public 9.9%
Private 14.5%
For-Profit 13.7%
Data can be found at http://www2.ed.gov/offices/OSFAP/defaultmanagement/instrates.html
The combined default rate covering ALL for-profit institutions regardless of program length is 15.0%.

Alexander W. AstinMarch 13, 2012 at 6:57 pm

A key part of the genius behind the American system of (nonprofit) higher education resides in its methods of quality control, which allow higher education institutions to minimize governmental interference and control over their activities. The US has managed to avoid having a central "ministry of higher education" that dictates policy and practice because each institution has a governing board that oversees its activities and especially because of the system of regional accreditation. Accreditation is a "peer review" process whereby carefully selected teams of professionals from peer institutions scrutinize the activities of each institution on a regular basis. Anyone who has ever served on an accrediting team can testify to the fact that accrediting visits are not superficial, pro forma review exercises. On the contrary, an accrediting visit is an extremely detailed review and evaluation of the institution's fundamental operations. Accreditation represents a form of rigorous but decentralized quality control that has allowed the US to develop a vibrant, diverse, and innovative system of higher education that is the envy of the world.
If an accredited institution is not handling student aid in a responsible manner, than this should certainly be brought to the attention of the relevant regional accrediting agency, not to mention the institution's board of trustees. To attempt to deal with such aid problems by means of state or federal government legislation or other heavy handed interventions while bypassing governing boards and accrediting agencies would be a huge mistake that compromises and undermines one of the unique strengths of our system.

For profits have, together a default rate of something over 60%.
60%
I see only bathwater.

Don GrybasMarch 12, 2012 at 5:23 pm

I substantially agree with Mr. Clark's comments. My career spans 30 years working with federal student aid administration on behalf of institutions in all sectors of education. While my experience includes bachelor degree granting insitutions, non-profits, and municipal adult education facilities, most of my background involves the proprietary (for profit) sector. The fact that the for-profit sector is more highly regulated and accountable to its students than any other sector of education is simply indisputable. The most recent evidence of this selective application of oversight and control is with the Education Department's gainful employment regulations from 2010. In summary, these regulations hold all for-profit institutions accountable for the success of its programs by ensuring that those programs lead to a student's gainful employment in a recognized occupation. If a for-profit institution's programs fail to meet this outcome requirement, the program loses its eligibility for federal funding. There is no such requirement for degree granting programs at traditional public unversities or non-profit schools. The programs at those institutions will continue to benefit from federal financial assistance regardless of whether or not those programs have successful outcomes. It seems as though the United States Congress and Department of Education don't see a problem with a student incurring a $60,000 expense for a 4-year bachelor's degree from a public institution only to end up jobless and in debt. However, they will require that a for-profit institution offering a one-year, $15,000 vocational program ensures that its graduates not only obtain employment, but also that such employment pays a salary significant enough for the graduate to be able to repay his/her educational debt. For-profit instituions are absolutely held to greater standards of success than publics and non-profits. It's also important to point out that "non-profit" is a tax status. Believe me, I've worked with many "non-profits" and I guarantee you that there's plenty of profit being enjoyed by many of the so called "non-profits". As an American taxpayer, I appreciate the standards that for-profit schools must achieve. Since tax dollars are also being used to benefit students at public universities and non-profits, I'd actually like to see those schools held to the same standards as the for-profit schools. The problem is that our entire Congress is a product of traditional, university, degree-granting edcuation and they have no knowledge about what happens everyday in the trenches at the thousands of small for-profit schools. Nor are they aware of the vast majority of success stories resulting from for-profit education. It's human nature to complain about mistreatment, but not to commend success. Yes, there are instances of abuse in the for-profit sector. These abusers should be investigated and prosecuted. But, the abusers are the exception and not the norm. Every sector of any government subsidy program suffers from its abusers. People abuse programs intended to provide assistance to the disabled, the poor, the unemployed, etc. Because there are a small percentage of abusers misusing these programs' benefits, should everyone receiving benefits from these programs be considered an abuser? More importantly, should people respecting the rules of such programs be denied assistance because others have abused the program? In a very real way, that is how all for-profit institutions are treated. For-profits are routinely convicted in the court of public opinion by the uninformed layperson who has no experience with the for-profit sector and only reads the negative anecdotes that seem to constantly be filling the media outlets. Do for-profits have a higher percentage of student loan defaults than public universities? Yes. For-profit schools, however, serve a significantly higher risk, lower income student than traditional universities. Without the lower cost, shorter programs offered by these for-profits, most low income students would have no educational opportunity. Are programs offered by for-profits more expensive than similar programs offered by community colleges? Yes. The training provided by most for-profit schools, however, is more hands-on with smaller student-teacher ratios. For-profit institutions have a greater compliance expense due to the higher level of regulatory accountability. Additionally, for-profit schools do not benefit from the other significant tax subsidies that are enjoyed by community colleges. To truly have an "apple to apples" comparison of educational cost between community college and for-profits, one has to look at not only the tuition cost charged by the community college but also the federal, state, county, and municipal tax revenues that are recognized by the public institutons that are not recognized by private institutions. The bottom line is that educational financial assistance is a student benefit, not an institutional benefit. American students should have the right to pursue whatever career choice they wish. There should be and is accountability on the part of institutions offering education. There also has to be accountability on the part of the student. The disclosure requirements with which institutions must comply are extensive. We have an informed society but all too often one passes blame rather than accepting responsibility for one's own decisions. Any postsecondary education be it for-profit, non-profit, or public requires hard work to succeed. It's no walk in the park and if you thought going to a for-profit school put you on easy street, don't blame the school if you were unable to complete your program. Once our Education committees and the rest of Congress start looking at all sectors of education as equally important to our educational goals, and do more legitimate investigative work than rely on the statements of a handful of disgruntled students or the allegations of a financial advisor with a huge self-interest in the failure of for-profit education, then maybe we'll actually be able to achieve the goals of our current administration. Let's get rid of the bath water, but the baby's future is necessary and important.

Raymond ClarkMarch 10, 2012 at 12:59 pm

Mr. Burd,
I would have to ask if you have ever been on staff or faculty of a "for profit" school that you so despise? As someone who has been so for over 15 years in two vastly different states (north and south), I can tell you that 1) yes, there are abuses, 2) the abusers are the minority! For the President or anyone else to lump all for profit schools into one category is equivalent to calling all white males members of the KKK. Your approach to this topic is fundamentally erred in the fact that you obviously have not done any viable research into the good that most for profit's do for students. The fact that our schools have always been held to stricter standards than the public "not for profits" is completely overlooked. When you look at the BIG picture, not just one or two failures, you will see that there have been millions more educated and working as a result of for profit schools than there have been at public institutions. Simply tracking the graduation and placement rates is a clear example. Who cares if you don't finish your degree at the local community college, or if you take 5 years to do so. But heaven forbid you need two years to graduate from a for profit. "They must be corrupt and should be closed! Send that money to the CC instead".
Our entire educational system would be in better shape if you, and everyone else, would focus on education and not your own personal gain. The fact is that some students will excel in for profits and some won't, just as some will excel in public schools and other won't. We are a highly diverse country and our educational system needs to reflect that diversity by providing for the needs of each group, not just the one supported by the loudest mouths.
Respectfully,
Raymond Clark